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Features 12 Dec 2018 09:44am

Cover profile: Lady Lynn Forester de Rothschild

Lady Lynn Forester de Rothschild tells Amy Reeve what she learned as a serial entrepreneur, how the Coalition for Inclusive Capitalism became a force for change, and why capitalism is not too big to fail

Caption: “God did not create the corporation”
Forget about the name for a minute if you can. Consider instead the achievements: a corporate lawyer with a Juris Doctorate degree from Columbia Law School; an entrepreneur who took the skills she learned from her employer John Kluge, the media mogul, used them to invest in telecoms companies in the 1980s, and became one of Fortune magazine’s “most powerful women in business”; a board member of, among others, Estée Lauder and The Economist Group until 2017; and the founder and chief executive of the not-for-profit Coalition for Inclusive Capitalism, which has played a decisive role in driving the conversation around business value and how to measure it.

Readers may be familiar with its Embankment Project for Inclusive Capitalism (EPIC), led by the Coalition and EY. It combines the experience of over 30 investor and corporate CEOs representing nearly $30trn assets under management.

Working on the provision that debate is good, but consensus and action are better, it has harnessed the knowledge of a group of major players in the investment community to work on an open-source, standardised framework so that organisations know which intangible assets and stakeholder value they should be measuring and how to measure them. Why? Because it is no longer enough just to measure the things that used to define a company’s success. As people around the world question the role of business, even capitalism, in society, demonstrating a long-term strategy that illustrates sustainable value should, at the very least, help to build bridges.

So yes, she is a member of the great European banking dynasty. The influential Rothschild name and title must surely open doors, just as it exposes her to remarks about privilege. But her dedication to promoting the inclusive capitalism movement is as genuine as it is effective. And that’s why Lady Lynn Forester de Rothschild is being interviewed for economia this month.

As she reflects on her career, it’s revealing that she has sought out integrity in her roles. She is an advocate of winning for no other reason than you have set your bar high; you are prepared; you have a vision. Or as she tells it: “To always do the smartest, best thing at every opportunity. Anxious to learn, wanting to be excellent, putting in the hours and wanting to really achieve something.”

She traces her ethics to her upbringing in New Jersey. “My parents said ‘we will provide you with all the education you want but then you have to make your own life’. So I took full advantage of all the education that schools were willing to give me. I can’t say I entered law school with a burning desire to be in the court room; it was a trajectory of a lot of people I admired.”

After graduating, she worked as a corporate lawyer for four years at Simpson Thacher before John Kluge, a client of the law firm, recruited her into a whole different world. The owner of what was then Metromedia, Kluge’s main business was television and radio, but he had marked out cellular telephones as the next big thing that decade.

“John Kluge was one of the first people in the world to see that cellular telephones were going to be a big deal. I didn’t know what cellular was, I thought it was something to do with biotech. But if John Kluge believed in something, you wanted to be there with him. So he offered me, particularly for my age, a fairly senior job in this new division, and we went around the country buying applications from small paging companies for cellular phones,” she says.

When Kluge went on to sell his TV and radio stations, and then his cellular business, his protégé knew she didn’t want to work for a big company. She had recognised an entrepreneurial streak in herself, and an interest in telecoms, which she wanted to test. So she asked Kluge for his advice: “He said, ‘you’ve been working on all of my mergers and acquisitions, you know what’s out there, you should buy one of these companies’. He didn’t invest in me but he sent me to the bank, and he gave me everything I needed to know to negotiate my first deal. I bought a company in Puerto Rico, with Motorola as my partner, and soon had a series of telecoms companies.”

Lady de Rothschild says she enjoys the nuts and bolts of business: the projections and forecasts, rais- ing money, understanding what investors want. “As John said to me, ‘money is never going to be your problem, what you need is vision and commitment to making that vision a reality. You will succeed as long as you have that.’ He would talk to people about me as a person who is going to make it. Nobody is going to give you anything. It’s hard work and everybody has obstacles. If you’re not willing to work through the obstacles, you’re not going to succeed. If you’re not willing to enter the race, you’ll never win it,” she says.

She applies this vigour to her current board roles, which she chooses based on the integrity of the leadership – specifically, someone who tells the truth and can present a long-term strategy – as well as the diversity of the business.

“I don’t think you can be on more than two boards, so it’s important to pick the ones you care about. I am comfortable with the integrity at the top of Estée Lauder. I’m proud of the board I helped create as chair of the nominating and board affairs committee. We’re the most diverse board on the Fortune 100 and are responsive to calls for good governance; I think I understand that space very well.”

Which brings us neatly back to why she’s here. EPIC’s progress report, published in November 2018, highlighted one of the key challenges to comparing and evaluating companies: everyone does it differ- ently. So whether an investor wants to know about talent, innovation and consumer trends, society and the environment, or governance, these aspects have been too abstract to measure.

EPIC, alongside other organisations, is helping to identify consistent metrics that a wide variety of companies could use to measure and report on their actions in these areas. “Without standard and verifiable metrics that investors can trust, companies will struggle to effectively communicate how they are creating long-
term value,” says EY’s CEO Mark Weinberger.

“For sure, that’s the most important work we’ve done,” says Lady de Rothschild, who admits that while she didn’t plan this, she was convinced that capitalism was under siege: “I became concerned after the financial crisis that with the overall state of capitalism in the world there were some good reasons to attack capitalism, but there were better reasons to save it. I worked with Dominic Barton, the global managing partner of McKinsey, on an isolated study on what companies were doing to improve the situation – before we throw out the baby, let’s look at the bathwater. I thought that was the end of it and then the City of London asked me to organise a conference on this topic.”

When she secured the backing of a high-profile group of people including Bill Clinton, the Arch- bishop of Canterbury, the Pope and Prince Charles, the message to continue was obvious.

So here we are. The Coalition is funded through charitable giving, and the working group, which comprises institutional investors, asset managers, business leaders, academics, policymakers and labour representatives, gives its time voluntarily. Meanwhile, EPIC has been building a framework that, crucially, has been put to the test within its own organisations.

One working group, for example, has been developing a rigorous method for companies to evaluate and assess the ability of a company to deploy the knowledge, skills and capabilities of its human capital. Why? Because there is still no standardised way to measure and show how an organisation’s people create value and drive a competitive edge.

“Even businesses that try to disclose this tend to do so with narratives in company publications – not quantitative data,” it says. Another working group put its head together to come up with a practical definition of trust – and a way to measure it so that markets can understand how actions that create or reduce trust affect a company’s value over the long-term.

Lady de Rothschild is proud of EPIC’s achievements to date. She also knows it’s a work in progress. “We still have a long way to go. The hope is that EPIC will be part of the standard that is created. It needs to be taken up by the standards-setters and the policymakers.”

And what happens if that progress isn’t made? What happens to society if, for some reason, investors or businesses decide they won’t engage? “Well, God did not create the corporation,” she says emphatically. “Capitalism is not too big to fail. If business loses its right to operate under the social contract with society, then all bets are off. You could go to socialism; you could go to chaos. Business has to play its proper role in society through safe products, employees who are well treated, and communities that are enhanced. It is not optional.”

She agrees with Accounting for Sustainability’s Jessica Fries, who said on these pages last month that being small does not exclude an organisation from playing its part and creating long-term value. She explains: “The Coalition happens to work with the largest so that we can move the needle, but the message is not confined to any size of any business.”

She thinks that somewhere along the line, the ethos of the great entrepreneurs has been lost. “Look at Unilever – Lord Lever understood this. Cadbury understood this back in the day. This is in the bones, and I believe it’s in the bones of capitalism, we’ve just lost track of it by focusing too much on the short-term profit.”

This isn’t the first time she’s been interviewed about catalysing global change, and it won’t be the last. But Lady de Rothschild is just as committed to encouraging dialogue and collaboration as she was after the financial crisis 10 years ago. She confesses she finds it hard to relax on holiday. But her son has introduced her to meditation and she says she’s “very disciplined” about exercise and nutrition. “I’m manic about that as well,” she laughs.

When calling to mind what it was like to work for John Kluge in what must have been quite a male- dominated world, she says: “I don’t even know if he really thought about me as a woman. He thought of me as an athlete who’s going to get the job done.” She may have acquired a title in the ensuing years, but her approach to life and business appears to have remained the same.